Higher High, Lower Close

Nothing too serious. It looks like the bars up from the recent low are a five-wave-sequence. It was possible to count it that way. But the retrace was quite shallow, so far.

ES Futures - Daily - Higher High & Lower Close

The measured retrace from the high is not even 23.6%. The daily slow stochastic is in over-bought territory. The monthly payroll report is tomorrow morning. It could be a market mover, so we'll just post-pone discussion until we see more in those results.

Have an excellent start to the evening,

TraderJoe

Too Many Waves!

I mean that in a kind way. Markets are allowed to have whatever waves work. Counting them is another issue. The DJIA having broken out to a new higher high forces us to count a little differently - still with an extended first wave xⓘ. That is because some of the recent down waves were longer than other ones, and by degree-labeling definitions, then, they should be larger degree waves. I won't belabor - the weekly chart and count are below.

DJIA (YM) Futures - Weekly - Diagonal, Possibly Leading

The problem is that the Nov 2025 down wave, ((ii)), circle-ii, or minute-ii, is too large for the wave at minuet (b), and for the previous wave at brown ii, so that means it is likely of higher degree. I think the only way that happens is if the entire Minor A wave is a diagonal with minute-ii, circle-ii, as the second wave of the diagonal. It is outlined with blue trend lines. Otherwise, there are too many waves for a motive sequence. The down waves are almost impossibly short waves to be in a typical impulse structure. We could clearly see the impulse sequence within wave minuet (a), and we have labeled those waves i -> v. But now the (c) wave of minute-i, xⓘ, looks like it is a diagonal too, with overlaps galore but always trending higher. It is outlined with brown trend lines.

We don't make this wave count lightly. First, we note that the $NYAD (NY Advance/Decline Line) is at yet a new higher high on Friday. Again, we don't think a major bear market starts while this line is making new highs.  Second, there is room yet for the ⓥth wave to continue higher. Recall, it can be almost as long as the third wave. Third, this count implies that if Minor A is a diagonal, then Minor C should be an impulse wave. Fourth, we have recently commented that the DJIA divergence with the transports was cured with all-time new highs in the transportation index. Lastly, we note that while many of the Mag-7 stocks are having difficulties, the FED's FOMC still has the spigots open - which might counter some decline, provide money for company buy-backs, etc.

So again, we are patient, calm and recognize how long a Primary-sized diagonal ⑤ could take. Meanwhile, we have not even seen a 38% retrace in these waves. Hopefully, such a wave, or larger, would be a Minor B wave. I realize that it is easy to make mistakes counting waves. If this labeling is a mistake, then it is the $NYAD which is providing the false signal. Time will tell. 

This is the second post since Thursday. Have an excellent rest of the weekend,

TraderJoe

Discount Double Triangles

On the ES daily chart, there is an outside day, up, with price tagging and over-shooting the 18-day SMA but eventually closing lower than it, as below.

ES Futures - Daily - Outside Day Up

From the truncation high, there is now a c = a, down, and potentially a c = a up. The problem is we don't know upward movement is over. It could be, and if so, great. If not, we'll continue the count upward since there are only three waves down.

ES/SPY (CFD) - 1 Hr - Three Waves Down

In the downward count, the parallel channel is pretty clear. The measurement of c = a downward is approximate, but pretty close. There are two triangles able to be located, the b wave one, and one for the ④th wave of c. Both would be in the correct place. We said the halting pace of the decline likely meant it could be a diagonal. Today, we were counting upward after the AMZN earnings drove the market lower in the after-market and then price swung around for the cash market session.

We understand other markets made new highs today. ES has not, yet. Today's upward count (in futures and CFD) can be counted like this.

ES/SPY (CFD) - 15 min - Three-waves Up

The wave starts out with a diagonal wave which converts to an impulse a wave, followed by a short in time b wave, followed by a potential c wave which starts when the cash market opens. The measurements are uncanny, at present, but again, we have no confirmation that the wave is over. It is suggested that the a wave, up, has to be overlapped to claim an end to the c wave.

It can be seen on this timescale that the MACD diverges, but this needs to be monitored. If a downtrend resumes, it will likely be in the form of a diagonal due to the degree of retrace.

We remain flexible. The only perplexing item at this time is the failure to make a new on Tues 03 Feb, as it seemed to indicate a truncation. We are keeping this in mind in the count. Perhaps we'll have more on the weekend.

Have a good start to the evening,

TraderJoe

Bearish Engulfer with A Lower Wick

There is nothing yet proven in the wave count. Today, the SPY cash index made a slight new daily lower low while the ES did not (yet). So, the main count is shown below on the SPY daily chart.

SPY Cash - Daily - Potential Diagonal

Note today that the local prior low (purple) was exceeded lower. And the daily alternate is shown below with red labels. 

SPY Cash - Daily - Alternate

Diagonals (or potential diagonals, better said) are always tricky. We will note, though, that the MACD is diverging and that is one sign to pay attention to. We want to give the potential diagonal all the time it wants, but we have certain limits. If the wave-counting stop is exceeded lower, that would be a serious wake-up call. The wave-counting stop is the same in both counts. Given the bizarre differences between cash and futures, we think, if today's low holds, then it would best count as a b wave.

There are currently no cash gaps above the market, but there are numerous ones below the market.

Have an excellent rest of the evening,

TraderJoe